Result preview – Oil &Gas – Higher prices (upstream) and CNG & PNG volume growth (CGD) to drive sales in Q1FY19

The rise in prices of crude oil is expected to improve realizations of upstream companies

Jul 21, 2018 01:07 IST India Infoline News Service

Crude Oil and Energy
Crude oil was volatile in the quarter and ended on a higher note (Brent up ~11%). OPEC continued with its production cut until its meeting in June, where it decided to increase production by 1mbpd. Although prices were rising on the back of declining Venezuelan production and risks of Iran sanctions, it was balanced by the growth in US crude production to some extent. This rise in prices of crude oil is expected to improve realizations of upstream companies like ONGC and Oil India. However, this benefit is expected to be partially offset by Kerosene and LPG subsidy sharing.

We expect oil marketing companies’ performance to be weak on a qoq basis compared to the decline in Singaporean benchmark GRM and due to the expected decline in marketing margin. Singapore GRMs declined by ~13% qoq to $6.1/bbl against $7/bbl in Q4FY18.

In Q1FY19, we believe petrol and diesel prices have not been hiked in line with the rising crude prices. This would keep the marketing margin of these companies under pressure.

City gas distribution (CGD) companies are expected to continue reporting strong volume growth due to conversion to CNG vehicles and rising pollution concerns. In Q1FY19, CGD companies have hiked CNG and PNG prices to offset the increase in input cost. These hikes are expected to aid revenue growth. However, spot LNG prices remained high during the quarter, which is expected to impact their margins.

Top picks: Petronet LNG, Indraprastha Gas
 
Reliance Industries Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 1,10,995 33.0 -5.1
EBITDA (in Rs cr) 16,865 47.1 -8.7
EBITDA Margin (%) 15.2 146bps -60bps
PAT (in Rs cr) 9,377 12.3 -0.6
 
We expect revenue growth of 33% yoy supported by strong petchem volumes. Improvement in petchem margin is likely to be offset by lower refining margins. We expect higher contribution from Jio. 
                                           
ONGC Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr)  26,683 39.9 11.3
EBITDA (in Rs cr)  14,153 60.4 69.6
EBITDA Margin (%)  53.0 678bps 1,822bps
PAT (in Rs cr)  6,492 67.1 9.8
 
 
ONGC is expected to report a growth in EBITDA supported by higher gas prices and lower operating costs. We expect crude oil volumes to remain flat while natural gas to report growth in volumes.
 
IOCL Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 1,31,946 25.1 12.4
EBITDA (in Rs cr) 10,217 27.7 -7.3
EBITDA Margin (%) 7.7 16bps -165bps
PAT (in Rs cr) 5,167 13.6 -1.0
 
 
IOCL is expected to report a decline in EBITDA supported by lower GRM and pressure on marketing margin. However, we expect the company to report higher crude throughput.
 
BPCL Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 72,689 27.2 11.4
EBITDA (in Rs cr) 3,100 159.2 -16.7
EBITDA Margin (%) 4.3 217bps -144bps
PAT (in Rs cr) 1,928 159.0 -27.9
 
BPCL is expected to report a decline in EBITDA supported by lower GRM and pressure on marketing margin. However, we expect the company to report higher crude throughput.
 
GAIL (India) Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 16,391 43.7 6.2
EBITDA (in Rs cr) 2,013 -0.1 2.1
EBITDA Margin (%) 12.3 -539bps -49bps
PAT (in Rs cr) 1,158 12.9 15.6
 
 
GAIL is expected to report growth in revenue supported by improvement in the petchem segment due to better realizations and higher contribution from gas marketing segment
 
HPCL Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 68,188 27.7 12.7
EBITDA (in Rs cr) 2,506 53.9 -14.2
EBITDA Margin (%) 3.7 63bps -115bps
PAT (in Rs cr) 1,418 53.4 -18.9
 
 
HPCL is expected to report a decline in EBITDA supported by lower GRM and pressure on marketing margin. However, we expect the company to report higher crude throughput.
 
Petronet LNG Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 8,777.14 36.4 1.6
EBITDA (in Rs cr) 840.4 12.9 2.2
EBITDA Margin (%) 9.6 -199bps 6bps
PAT (in Rs cr) 529.383 21.0 1.3
 
 
Petronet LNG is expected to report revenue growth supported by higher regasification volumes at Dahej and tariff revision at Kochi.
 
Oil India Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 3,265.9 40.1 8.9
EBITDA (in Rs cr) 1,397.325 59.9 74.5
EBITDA Margin (%) 42.8 530bps 1,609bps
PAT (in Rs cr) 860.675 91.2 -0.7
 
 
Oil India is expected to report growth in EBITDA supported by higher gas prices and lower operating costs. We expect slow growth in crude oil and natural gas volumes.
 
Indraprastha Gas Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 1,286.417 22.6 4.3
EBITDA (in Rs cr) 298.1 7.5 2.3
EBITDA Margin (%) 23.2 -326bps -46bps
PAT (in Rs cr) 190.74 18.3 9.2
 
Indraprastha gas is expected to report revenue growth supported by higher volumes of CNG and PNG along with improved realizations. EBITDA is expected to be affected by higher operating costs.

Gujarat Gas Q1FY19E yoy (%) qoq (%)
Revenue (in Rs cr) 1,811.326 22.6 4.5
EBITDA (in Rs cr) 234.67 -13.0 5.4
EBITDA Margin (%) 13.0 -530bps 11bps
PAT (in Rs cr) 83.67 -19.9 26.9
 
 
Gujarat gas is expected to report revenue growth on the back of steady industrial PNG volume growth and improved realizations. EBITDA is expected to be affected by higher operating costs.

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